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July 31, 2007
How Close Can You Estimate Soybean Yields?
We have all tried to estimate soybean yields; and in doing so, engaged in a hair pulling exercise. (I’ve just tried a little too often.) But as USDA’s crop enumerators are currently measuring soybean yields in your neighborhood, their process is based on pod weight and pod count in a set area. That’s different than either the pods and nodes formula or the wild guess formula that may be popular in your county. But with soybean yields so hard to estimate on August 1, USDA last week revealed some important statistics.
The Soybean Objective Yield Survey for 1992-2006 was released by the National Agricultural Statistics Service to explain its process, ahead of this year’s crop estimates season. Currently, 11 states are in the survey, although Arkansas has been in and out, and recent additions are Kansas, and the Dakotas. Seven core states (IA, IL, IN, MO, MN, NE, and OH) that have been surveyed for the past 15 years accounted for 71% of the 2006 crop.
USDA says its enumerators follow these procedures:
1. Enumerators will randomly select two independently located plots, each containing two parallel 3.5-foot sections of row located within a soybean field. (18 square feet.)
2. Counts, measurements, and observations of plant characteristics are made within these plots during the monthly survey periods.
3. Just before harvest, both units are hand harvested by an enumerator and weighed and a sample of pods is sent to a NASS laboratory where moisture content and pod weight are measured.
4. A final gross yield is computed from the number of pods, average weight per pod, and row space width, and that yield is measured as bushels of soybeans per acre at 12.5% moisture.
5. Harvest loss is measured in separate units located near the monthly yield plots.
6. State statistics are produced from the objective data, and regional estimates are made from the state’s harvested acreage.
USDA says in the past 15 years has resulted in changes in pod numbers and row widths. In the 7 major states, production was 46% higher in 2006 than in 1992, because of a 16% higher yield and more acres. For that period the average annual increase was .36 bushels per acre. Harvested acres went up 26%.
The pod count has increased over the 15 years similar to yields. For the 7 major states the pod count has climbed 21% to 1,791 per 18 square feet. The highest was in 2005 with 1,851 pods. Different states have different pod counts. IL leads all with an average of 1,780 over the 15 year period. MO is next with 1,704, and MN has the least with 1,483 per 18 square feet.
The pod weight has declined over the past 15 years, and the average of 0.296 grams per pod is 4% less than what it was in 1992. The low point of the period was in 2003 when drought hampered seed development. If that year is taken out of the average, there has been a slight increase over the 15 year period, but it is less than 1%.
Row widths, as expected have decreased over the past 15 years, and stood at 18.5 inches in 2006. That is 19% under the 1992 average. During the same time, pod count increased in the 18 square feet, since there were more soybean plants. In 2006, 44% of the samples had a row width between 10 and 18.5 inches, compared to only 10% of the samples in 1992.
Summary:
The USDA process of estimating soybean yields is more scientific than most farmer efforts, primarily because of the need for accurate scales and the ability to reconcile for moisture. Enumerators have found in the past 15 years, in the major producing states, that row widths have fallen, pod counts have increased, but pod weights have changed little.
Posted by Stu Ellis at 12:47 AM | Comments (1) | Permalink
July 30, 2007
Go Ahead; Try To Get A Warehouse Receipt On Your Field Of Switchgrass!
You are an expert at raising crops and livestock and moving them to market. But with governmental and social demands to produce biomass for fuel, how do you raise it, sell it, and get it to market?
You may be one of those who cross a bridge when you come to it, but some farmers are already starting to cross that bridge ahead of you; and you’re next in line. Biomass and cellulosic ethanol are the next wave of agricultural commodities, and in a few years you may have a warehouse receipt on switchgrass or sell corn stover on a hedge to arrive contract. Iowa State University economist Roger Ginder has studied the corn-ethanol infrastructure to predict what the biomass-ethanol infrastructure would look like. And there are many parallels that can be drawn. Both will fit into a physical infrastructure, such as roads, warehouses, and pipelines. There is also an intangible infrastructure that does not congest like truck lines at elevators, and includes grade and quality standards, price discovery mechanisms, and a regulatory structure.
Corn-ethanol
The physical infrastructure around an individual corn-ethanol plant will probably not be challenged, since there are roads, trucking companies, electricity, water, and telephone service. But when many of those plants suddenly appear on the map, there is a challenge to the infrastructure that is frequently not apparent. Corn-ethanol plants are either in operation or planned in 23 states with the top 5 states being able to produce 4.34 billion gallons annually and another 4 billion is being planned in the next 5 years.
Since those states have long raised corn, the infrastructure is present to haul, dry, store, and load the corn back into the transportation system. The well-oiled intangible infrastructure grades the corn, regulates its handling and storage, and provides the tools to profitable marketing. The advent of corn-ethanol has already begun to challenge the physical infrastructure with quicker turnover in storage as ethanol plants draw down stocks faster, and then put two different products into the transportation pipeline when the ethanol is refined. Early on, the increased corn acreage will challenge the infrastructure for inputs such as fertilizers and crop protection chemicals, as well as an increased demand for seed.
There are numerous concerns about the capacity of the physical infrastructure to handle the ethanol industry:
• Local dry mills have required increased trucking of inbound corn and outbound ethanol and DDGS which congests highways and results in more deterioration.
• Current storage capacity is built for a normal crop of near equal acreage of beans and corn, but with corn’s ability to produce more bushels per acre, storage facilities will be challenged.
• As ethanol production outpaces consumption in some localized areas, the ethanol will have to find rail or pipeline transportation to market, which cannot feasibly be provided.
• Rail transportation of DDGS is limited by rail lines not permitting it because of damage to cars at the point of unloading.
Biomass ethanol
Cellulosic ethanol production is in its infancy, with research increasing and only a handful of pilot plants in operation. Six experimental plants are in construction. Four will use wood waste or chips and two will combine that with yard waste. States producing a lot of corn ethanol would also be expected to produce biomass ethanol, however the greatest potential for biomass ethanol production is in the southeastern states. Much of the corn ethanol infrastructure could be used for biomass infrastructure if adjustments are made, particularly at the point of refining and beyond. It is the production, harvest, and delivery infrastructure that is currently non-existent.
New harvest and handling mechanisms will be required, along with storage facilities. Crop residue would have to be stored for up to a year, and that does not currently exist. Some ethanol plants could be developed where the biomass product, such as wood chips, already exists and handling problems are addressed. For areas of the country with either long or year-round growing seasons, the storage issue could be easily resolved with continuous harvest and delivery. The impact of biomass ethanol production on highways would be increased because the feedstock is less dense and would require more truck traffic to convey the biomass to the refining plant.
The intangible infrastructure also does not exist for biomass ethanol feedstocks, and will have to begin from scratch. Although corn is traded as a grain regardless of its use, there are no regulations for quality, grading standards, or dispute mechanisms in place for either crop or non-crop residue that can be refined into ethanol. Such commodities will have to be produced under contract with the producer and buyer sharing the risk without the benefit of a futures market. Without the regulatory infrastructure, such as warehouse receipts, a higher and more reliable collateral value will have to be established.
Summary:
As corn supplies tighten because of ethanol demands, efforts are increased to shift the burden to biomass, such as grasses, woodchips, or citrus waste. However, the handling and transportation problems with biomass feedstock remain unresolved, along with pricing, and other intangibles. Even with corn-ethanol, there are an increased number of infrastructure problems, and most of those will increase as a shift is made to biomass.
Posted by Stu Ellis at 12:51 AM | Comments (1) | Permalink
July 27, 2007
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
Soybean stocks may be large, but consumption is up from last year says Extension’s Darrel Good. Total crush is up3.8%, exports are 20% higher, and Good says overall consumption will be 3.051 bil. bu., with ending stocks at 591 mil. bu. Read more.
Darrel Good’s formula for estimating crop size is based on acreage in the good to excellent range, which currently points to a 42.2 bu. national average. He says the soybean rust in TX & AR should be controlled without hurting the Midwest crop.
Brazilian soybean farmers may not produce enough beans next year says Good, “The 2008 South American crop was projected at 4.3 bil. bu., only 75 mil. bu. larger than the 2007 harvest. Unless acreage in South America exceeds current projections, there may be a need to expand US acreage in 2008.” He says livestock and biodiesel demand, along with Chinese purchases will dictate soybean prices, which he says will remain extremely volatile. But he says basis levels will narrow as carryover works into the market.
If you have new beans to market, Darrel Good suggests storage as a primary option. “A strategy that involves storing as much of the crop as possible is encouraged by the current price structure particularly if on-farm storage is available. Hedging, or using hedged-to-arrive contracts, on a significant portion of that stored crop to capture basis gain appears warranted.” He says the market may have to buy more acres next year.
Add Arkansas to the list of states with Asian soybean rust. It has been found in the southwestern corner of the state bordering TX where northern counties have recorded confirmed findings also. Keep up to date with soybean rust.
Rust authority X.B. Yang at Iowa State says the rust outbreak in northern TX raises the possibility for rust spores to reach the Cornbelt. “Computer models suggest that soybean rust spores could be blown as far north as central IL in August in an effective concentration. It is likely that more soybean rust will be found north of TX in the western pathway of soybean rust during the remainder of the season.” He says weather models indicate a less than 40% chance for rust to reach IA in the next 30 days.
If spraying for Asian rust, yield loss from sprayer damage will occur in soybeans at this late date says MO engineer Bill Wiebold. “Yield loss of less than 1% would be expected if normal boom widths of 30 to 60 feet were used for spraying soybean plants at R2. Yield loss might approach 3% if damage occurs at R4.” Yield loss in damaged rows was 77 to 90%. Read his analysis.
Cooler temperatures in the northern part of the Cornbelt have allowed soybean aphid populations to increase to levels that warrant rescue treatments. IL Extension aphid experts say, “The economic threshold is 250 aphids per plant (field average) with 80% of the plants infested and the economic injury level (generally when the cost of control equals the cost of the yield loss) is slightly greater than 600 aphids per plant.”
If you have potential economic damage, WI Extension’s Eileen Cullen says, “Foliar sprays are most effective in reducing aphid numbers and minimizing resurgences when applied during the R2 (full bloom) to R4 (full pod) stages of soybean growth. Spraying at or beyond R6 (full seed) has not been shown to prevent yield loss.” She recommends examination of 20-30 plants over 80% of the field to make your spraying decisions.
You may have some waterhemp that is resistant to both glyphosate and PPO inhibitors. Extension weed specialist Aaron Hager says there are increased reports of poor control. He’s also had several reports of giant ragweed and common lambsquarters populations that have not been controlled following single or multiple applications of glyphosate.
Has your scouting found corn with a second ear coming from the shank of the first ear? Crop production specialist Emerson Nafziger says any silks coming from the second ear will attract corn rootworm beetles. He’s also found fresh silks coming from ears with brown silks, but without a source of pollen, blank kernels will remain on those ears.
Soybean flowering and podset may be hurt if night temperatures remain in the 50 degree range. IL Extension’s Nafziger says lower temperatures limit podset and the crop will be better off with night temperatures in the mid to upper 60 degree range. Read his latest newsletter.
Spider mites usually attack drought stressed beans, but this is a different year for them. Marlin Rice at Iowa State reports spider mites in fields with adequate moisture and even an irrigated soybean field. Before spraying, you need to have live mites, which have caused stippling on leaves, and a forecast for dry or droughty conditions ahead.
Beef production is down 1%, but prices are up 9% in the first half of 2007 according to Purdue’s Chris Hurt. He says total supplies should be somewhat lower in the coming 12 months than the past 12, with first quarter 2008 prices $92-96, and second quarter higher. He’s expecting finished weights higher, more calves in feedlots, and heifers retained.
Livestock Gross Margin Insurance will be available in more states beginning July 30. Essentially, LGM for Swine provides insured producers an indemnity when the spread between the market hog selling price and corn and soybean meal input prices narrows due to changing market conditions. Eligible Cornbelt states include: IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, and WI. Read how it applies to your operation.
Posted by Stu Ellis at 6:03 AM | Comments (0) | Permalink
July 26, 2007
Do Pork Producers Benefit From The Slogan, "Pork. The Other White Meat."?
Everyone knows the marketing slogan: Pork, the Other White Meat; but has it made pork products any more desirous to the consumer? After all, that is the intent of the pork check-off program, as it tries to produce and market a better product to enhance the price of pork. Has it achieved what it set out to do, particularly with consumers also being bombarded by marketing messages also promoting beef and poultry?
The $60 million pork check off program is controlled by the National Pork Board, and NPB Directors hired economists from North Carolina State University and RTI International to evaluate the impact of the pork advertising expenditures. The research took advertising expenditures into consideration, along with health issues that tend to soften demand. Those included foot and mouth disease in Britain in 2001, BSE in Washington State in 2003, listeria fears in poultry in 2002, and Avian influenza in poultry in 2004.
When the beef and pork check-off programs began in 1987, beef took off rapidly with its “Beef, Its What’s for Dinner” promotional campaign. The economists report, “On average, the Cattlemen’s Beef Board spent more on beef advertising than the National Pork Board on pork advertising. However, the Pork Board has increased its advertising expenditures over the course of the program while the Beef Board’s advertising expenditures have changed little in nominal terms. In 1987, the debut year of both programs, the Beef Board spent about $27.3 million on beef advertising and promotion in contrast to the $9.8 million expenditures by the Pork Board on pork advertising and promotion. In 2005 the Pork Board’s expenditures on advertising and promotion activities were $35 million, while the Beef Board’s expenditures on the same activities were $28.2 million. Taking into account the effect of inflation on media costs over the past two decades, the real generic beef advertising expenditures likely have fallen since the inception of the check-off program.”
The economists believe that consumers already have a tendency to purchase specific quantities of meat, before exposure to any advertising. Those quantities are 14.2 pounds of beef, 7.3 pounds of pork, and 7.2 pounds of poultry. If the price of the meat increases, the consumer will spend more to get that quantity of meat, but will reduce what they spend on additional quantities.
In conclusion, the economists report, “We find the impacts of advertising and food safety effects to be economically small compared with price and expenditure effects. However, cost-benefit analyses are needed to evaluate whether such practices are profitable to producers.” However, they believe that generic pork advertising appears to help demand for poultry more than pork. Poultry, of course, does not have a check-off program but may be getting a “free ride” from the pork producers.
Summary:
Any investment should be periodically evaluated, and the investment made by pork producers into a generic advertising program was statistically evaluated in an attempt to determine its value. The economists found that consumers are already pre-disposed to purchase certain meats, and generic advertising paid by the check-off had only a small impact on increasing sales.
Posted by Stu Ellis at 12:10 AM | Comments (0) | Permalink
July 25, 2007
Will Your Farm Be Operating As A Family Business After You Are Gone?
Charles Darwin taught us the fittest will survive, whether it is lions, or barn swallows, or humans. And that implies businesses managed by humans will survive if they are fit and generational change is well-planned. While sometimes it is tough to plan from one day to the next, managing those daily risks is much easier if a plan is in place to do just that. We make year to year cropping plans; why not make generation to generation farm business plans?
That is the rhetorical question David Marrison wants you to ask yourself in his capacity as an Agriculture and Natural Resources Educator with Ohio State University. The complexities of the market and the vagaries of the environment require planning, and Marrison says, “It is essential that farm managers take time to adequately plan for all facets of their business.” Family history enters into the picture at an early stage in the planning, along with an abundance of institutional knowledge. “While these values and goals oftentimes remain unspoken, they have a large impact on how family members treat each other, employees and make business decisions.”
Marrison offers help and hope for farm families engaged in transitional planning. It all begins with individual assessments to determine who is best at bookkeeping and who is best at building fences, as well as identification of goals for oneself, family, and farm. Next comes an analysis of the farm business which includes profitability, business structure, and external influences such as governmental, economic, environmental and technological. And Marrison says a mission statement is important, “This statement aligns what the business says it does, what it actually does and what others believe it is about.”
Once the business is understood by all involved, and those involved understand the business and the role they play, there is a need to build five planning areas, which Marrison likens to spokes on a wheel that are equally important, but must carry their own share of the load.
1) Business Plan
A business plan is much more than choosing corn hybrids, because it demands plans for operations, financial, marketing, personnel, and risk management elements of the business. Business planning examines the Strengths, Weaknesses, Opportunities and Threats in each of these areas. The outcome is a roadmap to where the farm is going and how it is going to get there.
2) Retirement Plan
Today’s social structure in agriculture involves older farmers who can’t retire and younger farmers with no where to farm. A retirement plan is designed to prevent that by requiring the participants to answer 2 questions; how much money does each family member need for retirement and what will the farm’s obligation be to retirees?
3) Transition Plan
Transition planning helps the family analyze their current situation, examine the future, and then develop a plan to transfer the business to the next generation. This involves decisions on who will make certain operational and management decisions. It also addresses issues with non-farm heirs and how they will be financially treated.
4) Estate Plan
With the help of legal and financial counsel, questions need to be answered about distribution of the farm’s assets from one generation to the next. There are many tax and legal complications that can occur and those should be resolved at the outset.
5) Investment Plan
While most of the farm assets are in land and equipment, some liquid assets may be invested in other equities or insurance. They may have been accumulated to pay for expected expenses in the future, but decisions will need to be made on financial performance, risk tolerance, and tax liability issues.
Summary:
Many businesses today fail because of inadequate planning. Farm operations, usually with an abundance of assets, can become successful over the course of many generations with proper planning. By close examination of the business, retirement plans, transitional issues, estate complexities and investment policies, the principals in a farm operation can develop a whole farm transition plan that will ensure the life of the operation for generations to come.
Posted by Stu Ellis at 12:20 AM | Comments (1) | Permalink
July 24, 2007
If The U.S House Version Of The Farm Bill Becomes Law, How Will You Be Affected?
Your Congressman this week will be debating the House version of the 2007 Farm Bill, as will every other member of the House of Representatives. Their constituents all have a stake in the Farm Bill, whether they farm, drive a car, eat, or pay taxes, and that is just about everyone. When the debate ends on Thursday, the Farm Bill will be half way home, only waiting for the Senate to do the same thing after Labor Day. Have you called your Member of Congress about the issues, or don’t you know what is proposed that will impact Cornbelt agriculture?
The House Agriculture Committee proposed 2007 Farm Bill begins with the 2008 crop and expires after the 2012 crop. The $299 billion cost averages about $60 billion per year, down from $90+ billion in the early years of the 2002 legislation. Beyond the $299 billion, there could be an additional $4 billion available for nutrition, $2.5 billion for energy, and $1.6 billion for specialty crop promotion. There is no funding for a permanent disaster aid program.
New farm program payment limits are proposed that were a trade off for the additional funding. If you have more than $1 million in adjusted gross income, you will not get any farm program payments, and 2/3 of your income must be from agriculture, or you will not get any payments if your adjusted gross income exceeds $500,000. Additionally, the three entity rule is eliminated, meaning payments will not be allowed to a person under additional family corporations or partnerships. Counter-cyclical payments are capped at $65,000, Direct payment caps rise from $40,000 to $60,000, generic certificates are eliminated, but there are no caps on LDP’s or marketing loans.
Something new is a choice that will be given for farmers to receive either a price triggered Counter-cyclical payment or a revenue Counter-cyclical payment, and the choice must last for the entire 5 years. A national per acre revenue target would be set at
$344.12 for corn, $231.87 for soybeans, and $149.92 for wheat. Payment per acre yields would be 114.4 bushels for corn, 34.1 bushels for soybeans, and 36.1 bushels for wheat. Additionally, target prices were rebalanced: Corn: $2.63 (unchanged), soybeans $6.10 (up 30¢), and wheat $4.15 (up 23¢). Loan rates are proposed at $1.95 for corn (unchanged), $5.00 for soybeans (unchanged), and $2.94 for wheat (up 19¢).
Conservation programs have some revisions. Conservation payments are capped at $60,000 for one program and $125,000 for multiple programs. The CRP continues with 39.2 million acres maximum, but contracts can be modified if a retiring landowner is transitioning to a beginning farmer. The WRP would extend through 2012, with maximum acreage at 3.6 million acres, and USDA must use fair market value for evaluating appraisals for payments. The CSP contracts will have more funding and is simplified with replacement of the 3-tiered program with an annual stewardship payment. Additionally, the CSP will be applied in more geographic areas. EQIP funding rises to $2 billion by 2012, but 60% remains for livestock production.
Energy funding includes $2 billion in loan guarantees for biorefineries and $500 million for rural energy improvements. Another $1.5 billion is allocated for incentives for biofuels production. Another program creates 5-year contracts for producers to encourage biomass production for biofuel refineries.
Other provisions:
1) Restrictions are developed against the use of arbitration in production contracts and the USDA is authorized to better control the dispute settlement process.
2) Biofuels plants receiving federal grants must pay prevailing wages for construction laborers.
3) An incentive program is created, but unfunded, for oilseed producers to grow low trans-fat oilseeds.
4) Subsidy checks under $25 would not be written, and anyone convicted of defrauding the USDA would be prevented from program participation.
5) FSA and NRCS offices could not close or relocate within a year after enactment of the legislation.
6) A non-binding attempt was made to protect manure from being declared a hazardous waste and subject to EPA superfund regulations.
7) There will be coordination of federally funded agricultural research, similar to the National Institutes of Health, with competitive grants for research.
8) Group crop insurance policies could be obtained in addition to individual crop and revenue policies.
9) Country of Origin Labeling (COOL) is established for implementation 10/1/08 and would label meat as being US raised and slaughtered, or completely of foreign origin, or a blend of domestic and foreign. Fruits and vegetables are not included.
Summary:
Cornbelt agriculture would still be productive under the proposed House Farm Bill, however, some farm operations would notice some financial impact as the result of payment limitations. Other operations would notice increased funding from some payments. Farm operators will need to study the ramifications of having to make a choice between a price-triggered counter-cyclical payment, and one that is triggered by revenue. Extension educators should be consulted for assistance, once program details are published, if the House provision becomes law. If farmers have problems with any of the proposals, Members of Congress should be contacted before this week's debate.
Posted by Stu Ellis at 12:52 AM | Comments (0) | Permalink
July 23, 2007
When Is A Good Time To Sell Grain?
Crop statisticians with USDA’s National Agricultural Statistics Service will soon be venturing into corn and soybean fields to begin collecting data for the August 1st Crop Report, which is the first objective yield survey of the new crop. The acreage has been established and the only unknown is the yield, which will be estimated on August 10. While it will be only 17 days until the report is released, a lot can happen in those 17 days to market prices. Is it a good time to sell grain?
Across the Cornbelt crop conditions range from excellent to poor. There will be some 200 bushel corn and some 20 bushel corn, and there will be some on both sides of that range. It is the same for soybeans. Selling grain based on the crop in your field is hard to do, so let’s step back to look at the wider view, offered by Outlook Specialists Melvin Brees at the University of Missouri and Allan May at South Dakota State University.
Melvin Brees, in his July Decisive Marketing newsletter, says, “Market analysis and paying attention to market signals can provide clues for when it is a good time to make sales.” And he offers some marketing basics:
It is usually a good time to sell when:
1. prices are near historic highs or current year futures contract highs,
2. prices are at or above projected prices ranges for the marketing year,
3. upside potential appears limited,
4. there is significant downside price risk,
5. the seasonal trend is for lower prices,
6. basis is strong or at least expected to weaken, or
7. prices generate a favorable return.
With those principles in mind, what about corn? Brees says:
• Although December ’07 corn futures have traded nearly $1.00 off of recent highs, prices remain at levels occurring only about one-fourth of the time in the last 35 years. Current price levels rarely occur in nearby futures at harvest time. (Principle #1)
• New crop cash bids are priced within USDA projected 07-08 corn price range, but a few are near the bottom of the range. (Principle #2)
• Upside potential may result from the need to bid for 2008 acres and any production disappointments could push prices back toward highs. Retracements to $3.85 or $4.00 (50 percent and 62 percent technical retracements) are still possible with weather concerns and strong demand for corn even if prices don’t return to previous highs. (Principle #3)
• Large acreage and potential for large production with increasing carryover suggests possible downside risk at these prices. But downside may be limited because demand is strong with more production needed in year ahead for ethanol. (Principle #4)
• The season price trend is usually down after the crop reaches the pollination stage. (Principle #5)
• Weak new crop basis suggests weak cash demand and lack of storage availability are contributing to cash prices that are in lower part of expected price range. Stronger basis in old crop bids suggest active current demand. Ethanol plants and large corn users are bidding for deliveries, which are reflected in some new crop bids as well. (Principle #6)
• Prices near $3.00 should generate profits unless serious production problems reduce yields. (Principle #7)
• Many technical signals (broken uptrend, short term down trend, broken technical support, etc.) suggest limited upside potential with numerous areas of strong resistance to limit up moves. (Principle #3)
Allan May says the decline in corn prices really began in late June and the recent volatility has taken us back to a point equal to last October, which is 80¢ to $1 under the February highs. In his recent corn newsletter, he says the volatility will continue and both he and Brees advocate pricing corn if you have not already done so, “Be prepared to make additional sales if prices move higher and be sure to put a “backstop” price on this market to insure that you make sales if prices move lower in the face of potentially improving weather conditions that would stabilize or improve production of 2007 corn.”
Let’s take a look at soybeans. Brees says:
• Last week November ‘07 soybean futures prices exceeded $9 before falling back into the $8.00 range. While well off the highs, historically these are still high prices and are price levels rarely available at harvest time. (Principle #1)
• In spite of the sharp price break, Missouri new crop cash bids remain within USDA’s projected 07-08 soybean price range. (Principle #2)
• Higher price potential may result from reduced acres and tightening of carryover supplies. Poor weather into August could push prices higher. (Principle #3)
• Lower price risk due to large world supplies and market signal for South America to increase production. In addition, the soybean/corn price ratio of about 2.6/1 heavily favors soybeans and is not likely to continue due to strong ethanol demand for corn and the need for increased production in 2008. (Principle #4)
• The seasonal trend tends to be toward lower prices from mid-summer into the fall harvest season as production prospects become better known. (Principle #5)
• Weak basis for both old and new crop cash bids suggests weak cash demand for soybeans.
• Prices at $8.00 generally represent rare opportunities for significant profits. (Principle #7)
• Broken short term uptrend is a technical signal that the price trend may have reversed and is a sell signal. Market carry does not offset storage costs, suggesting that delaying sales and storing may not pay. (Principle #3)
Allen May acknowledges the issue of the horrible basis in the bean market in his bean market letter, and from his vantage point, the basis is $1.30-$1.45 under futures prices, all because of abundant local supplies to feed the local demand. He says if you sell now, you give up the chance for higher prices, but protect a good price now. And he adds, if you wait, you may get a higher price, but could lose a good price now, if the market declines. “Remember, profit is the name of the game; don’t let greed get in the way of making sound marketing decisions.”
Summary:
Both Brees and May, from the southern and northern sides of the Cornbelt, could not agree more on the profitable prices the market is still offering, even after $1 was lost in recent trading sessions. As the August crop report approaches, many private firms will be issuing their own estimates of the crop, and the market will experience increasing volatility with both the potential for more losses and gains. Many marketing tools are available to farmers, in the cash, options, and futures market to protect profits that are currently being offered.
Posted by Stu Ellis at 12:57 AM | Comments (0) | Permalink
July 20, 2007
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
Soybean prices may continue to be quite volatile as the growing season wraps up, but current futures prices appear to offer attractive pricing opportunities, says Extension’s Darrel Good. He says USDA sees the 2007-08 marketing year average farm price in a range of $7.75-$8.25, compared to the $6.35 average for the year ending on August 31. Read his newsletter.
The soybean market is currently offering about 90¢ return on 9-months storage of the 2007 crop says Darrel Good. At 8%, the interest cost for 9 months storage is near 50¢, leaving a 40¢ return to cover physical storage costs. As the new crop is priced, the market is encouraging that it be stored and priced for later delivery – selling futures, using a hedged-to-arrive contract, or a cash contract if the deferred basis bids are strong.
Soybean supplies could be short, says Iowa State economist Bob Wisner. Even with a 60 mil. bu. decline in 2007-08 exports, the projected US August 31, 2008 soybean carryover stocks drop by 59% from this year. Indicated ’07-’08 exports are down 6.4% or 70 mil. bu. from last year. The projections show carryover stocks at an adequate 4.3 weeks supply, but with very little reserve supply in case of 2008 weather problems.
Both Wisner and Good say the market is encouraging South American soybean acres, but Wisner says “USDA’s July 12 World Supply-Demand report implies that as mid-July approached, 2008 futures were not yet high enough to generate a large increase in Brazilian and Argentine plantings this fall.” Due to currency relationships between the US and Brazil, input costs are high, market prices are low, and profit margins are weak.
The corn market’s weak new crop basis and large futures carry suggests to IL Outlook Specialist Darrel Good that pricing for delivery late in 2007-08 marketing year offers the opportunity for very good storage returns. He says the July 17 harvest bid in central IL was $.76 under July 2008 futures. If the basis improves to a typical level of 15¢ under July by June of 2008, the market is offering a storage return of 61¢ per bushel. At 8% interest, the cost of holding $3.00 corn for 8 months is only 16¢. Compare your prices.
The growing demand for corn by ethanol plants will continue to diminish stocks, unless 2008 corn acreage increases, says Iowa State’s Bob Wisner. He says this year’s extreme increase in corn acreage came from a very sharp decrease in soybean and cotton acreage, and Dakota spring wheat acres. “Early indications are that the soybean, cotton and possibly other markets will become more competitive for acreage in 2008, thus making it very difficult for corn to attract another large increase in acreage next year.”
Premium grain prices are attractive to landowners who will want higher cash rents. But Extension Specialist Gary Schnitkey says the coming year will also bring higher input cost, lower government payments, and volatile commodity prices that will not provide guaranteed revenue for you to pay higher rent. Read his newsletter warning about cash rent.
Corn prices have been increasing in the Plains states relative to Iowa, says livestock economist John Lawrence. During 2001-2005 Iowa corn was 9¢ to 44¢ per bu. less than other regions. Iowa’s price continues to decline relative to Chicago while other regions, with the exception of Omaha, have increased in the last ten years. In the last 17 months, Iowa’s price has declined while the other regions increased, and some significantly. See his basis graphs.
DDGS use is up in IA says Lawrence, but the supply is growing faster than demand, so the price is falling. He says a ton of DDGS has declined from about 50 times the price of corn to around 30 times the price of corn, basis Chicago. Lawrence says the market is still maturing and prices will vary as more plants add to the supply or changes in processing cause the relative feed value and/or inclusion rates to influence demand for DDGS.
Prices for ethanol co-products vary widely. In the past 6 months, wet DGS prices in NE are 20% higher than IA, and IL wet DGS is 10% cheaper than IA, likely reflecting local supply and demand for wet co-products. However, dry DGS is higher priced in IL and not quoted in NE. Dry DGS can be shipped great distances and prices are influenced by freight rates, potentially increasing local DGS prices relative to IA even further.
Pork production continues to evolve through networking says Missouri’s Glenn Grimes. 25% jointly purchased inputs. 14% were jointly milling feed, compared to very few in 2003. Nearly 33% were networking to market. Feeder-or-weaned-pig-production networking grew substantially between 2003 and 2006 and amounted to 26% in 2006. Networking for genetic access grew very little from 2003 to 2006 and amounted to 12% in 2006. Information sharing is at 22%.
Numbers of soybean aphids are declining in some states, increasing in others. IL entomologists say soybean aphid densities can double in 2 to 4 days, depending on temperatures. If natural enemies are not abundant and temperatures remain cooler, we could still encounter economically threatening levels of soybean aphids in 2007.
Soybean rust remains in Gulf Coast states, but Cornbelt sentinel plots have many other varieties of fungus. Visit: http://www.ipm.uiuc.edu/bulletin/article.php?id=812 .
1) Septoria brown spot is in the lower canopy, but yield loss will be minimal.
2) Frogeye leaf spot may require a fungicide at R3, but yield benefit is not a certainty.
3) Downy mildew is only controlled by planting resistant varieties and crop rotation.
4) Bacterial blight is in the upper canopy. There is no fungicide control nor yield concern.
Recent Cornbelt storms have caused lodging in some cornfields. Research says lodging did not affect silking, but does increase the number of barren plants. Ears per plant are reduced. Researchers speculate that kernels per ear and seed weight were likely affected. Lodging not only affects yield components but also disrupts the entire plant orientation. Reorienting the canopy to better intercept light comes at a high energy cost to the plant.
Most Midwest corn fields are pollinating and have good moisture says Extension Crop Specialist Emerson Nafziger. Ten days after pollination multiply kernel rows, by the average number of kernels in the row, by number of ears in 1/1000 of an acre. Nafziger says 14-18 million kernels per acre is a good yield. He says you want enough kernels so that yield is limited by the extent to which kernels can fill, rather than by kernels' reaching their maximum size, as can happen when kernel counts are low.
To protect your crop, Nafziger says every trip to the field from now to drydown should include an effort to see how the health and color of leaves and canopy (number, size, and arrangement of leaves) are holding up. Assess individual leaves for color, indicating nutrient status, and for the presence of diseases that can limit effective leaf area.
Take note of the weather for the rest of the summer. Nafziger says lack of water (associated with high sunlight) is more often limiting to yield than lack of sunlight. Still, on a daily basis, how much grainfill takes place is tied to the amount of sunlight that day. Read Nafziger’s newsletter.
The lack of moisture in OH is causing many corn growers to value their crop for silage instead of grain production. With negligible rain since May much of the corn shed its pollen before silks appeared. Crop specialists are also warning of spider mite problems in soybeans and the increasing potential for soybean aphids to also dehydrate soybeans.
OH and IN producers in drought areas really need a rain to cure spider mite problems say Purdue specialists. “Obviously the best plant stress reliever under dry conditions is rain. Significant rain doesn’t control spider mites but helps the soybean plant become more vigorous and healthy, which in turn makes the “juices” of the plant less nutritious to the mites, and makes mites less likely to reproduce as quickly.”
No matter the weather, OH crops are hurt says NWS hydrologist Jim Noel. Corn and wheat are most impacted by El Nino and La Nina events. 92% of the time when a La Nina occurs, corn crop yields are below normal by 13% below trend line. For El Nino events, 67% of the time corn crop yields are below normal by 13% below trend line.
Have you booked diesel fuel for the fall? Kansas St. economist Kevin Dhuyvetter says based on futures prices, Sept. is 4% under last year, but prices for Oct. through December will be 9-10% above last year.
The dubious honor of the week award goes to Cuming County, NE. A soil sample was taken there and sent to the University of NE to test for Soybean Cyst Nematode. SCN had never been found there before 1998. The 4 ounces of soil contained 136,000 eggs, which was declared a new state record. No one has come forward to claim the trophy.
Posted by Stu Ellis at 1:13 AM | Comments (0) | Permalink
July 19, 2007
It Is Time Again To Adjust Your Marketing Plan For Corn
“Turnaround Tuesday” did not reverse a corn market which was locked limit down with advantageous Cornbelt rains. But the “dead cat bounced” on Wednesday’s futures trading as near term rains and distant dryness tugged at traders emotions. Some elevator managers were advising farmers to back away from their $4 offers because heavy hedge fund selling would overcome all bullish opinion. If it is time to either adjust or execute your marketing plan, let’s take a look at some of the facts you need to know.
Four of the most prominent Cornbelt outlook specialists have weighed in this week on the issue of acreage and yield, all in an effort to project the size of the crop and get a head start on what price trends will be later in the summer and in the fall. You’ll get a summary of the weekly or monthly newsletters of Darrel Good at the University of Illinois,
Chris Hurt at Purdue University,
Bob Wisner at Iowa State,
and Matt Roberts at Ohio State University.
For more details, tables, and graphs, follow the links to their newsletters which are all worth reading if you have grain to market.
USDA’s June 29 Acreage Report provides a stepping stone for the extent of corn planting this year, particularly about acreage that is not traditionally in corn. Acreage was estimated at 92.888 million, up 14.561 million from 2006. 85.418 million acres are expected to be harvested. Ohio State’s Roberts believes that to be optimistic because droughty corn acreage in the southeastern US could be abandoned.
USDA’s trendline yield is 150.3 bushels per acre, and if that holds, production would reach 12.838 billion bushels. Darrel Good says, “Corn prices, and particularly the new crop basis, will remain weak into harvest if the final two months of the growing season point to an average yield above 150 bushels per acre. Basis and cash prices are expected to rebound after harvest in order to ensure large corn acreage in 2008. Based on conditions in mid-July, a 2007-08 marketing year average farm price of $3.30 is expected. At the close of trade on July 17, the futures market reflected a 2007-08 average farm price near $3.35.”
Both Good and Iowa State’s Bob Wisner said this year’s production, along with the ending stocks of more than 1 billion bushels should be adequate to meet 2008 consumption. But how is this year’s production really being measured? Good says USDA’s estimate is based on several factors, “Based on a continuation of that trend, the trend yield in 2007 is 148.7 bushels per acre. Using an econometric model fit over 1990-2006 using trend, July weather, and planting progress, the USDA calculates the likely yield for 2007 at 150.3 bushels per acre.” Good says there are some estimates of a higher yield that are based on an increased percentage of biotech hybrids and this year’s substantial use of fungicides. And he adds that a formula based on weekly crop condition ratings is currently projecting a 148 bushel crop.
At Purdue, Chris Hurt was estimating the average yield at 149 bushels, also based on current crop ratings, “The week of July 16th was setting up to be a critical one as crop conditions in Minnesota, Iowa, and Nebraska were going down rapidly, and the forecast was very hot and dry. However, as Mother Nature has the final say, that forecast turned to more abundant rainfall in some portions of the Midwest and somewhat cooler. Thus, staying with the USDA estimate of 150.3 bushels per acre is reasonable at this point.”
Since many private analysts have estimated yields anywhere from 147 to 160 bushels per acre, Ohio State’s Matt Roberts looked at four different calculations to develop a trend: 1) First, I performed a simple forecast using past US national yield data—the US National Yield Model. (154.081 bushels)
2) The second was the Adjusted US National Yield Model, an adjustment of the first model so that acres planted in 2007 in excess of the maximum number of acres planted between 1990 and 2006 had expected yield reduced by 5% to represent corn-on-corn yield lag and the effect of farmers, especially in the South, growing corn for the first time in many years. (153.159 bushels)
3) In the third model, Composite Yield, I forecast yields for each state based upon historical data, and using the June 30 plantings report, estimated a national yield from the state yields. (152.774 bushels)
4) Finally, the fourth model, Adjusted Composite Yield, is a state-by-state composite model adjusted for yield drag. (152.177 bushels)
Roberts says he’s satisfied that 151-153 bushels will be the national average, but knows that some are concerned about Eastern Cornbelt dryness and flooding in parts of IA & MO, “Every year there are poor weather conditions somewhere, but without devastating drought, I think it is unwise to make significant adjustments for corn until pollination has finished.”
Based on acreage, yield estimates for the new crop, and old crop carryover, supplies should be sufficient for the growing demand. But the demand dynamic affects the price more than it has in years past. So price prospects might be a bit more ethereal this year.
Iowa State’s Wisner calculates an average $3.05 futures price and $2.95 farm price for the marketing year, based on a 150 bushel average yield. Purdue’s Hurt believes cash prices will remain above $3 for harvest, “Given current prospects, corn prices at harvest are expected to be in the $3.00 to $3.20 area given December futures in a $3.40 to $3.60 range and basis levels of 35 to 45 under. By January these bids are expected to be closer to $3.30 to $3.60. Thus gross returns for storage are expected to be 30 to 40 cents per bushel to the first of the year.”
Roberts at Ohio State agrees with the $3 bid range, but says farmers will have to closely watch the basis because of storage issues, “There will likely be large storage pressure this fall, resulting in harvest basis bids of 40c-60c under. If you can lock in 35c or 30c, or even better, I would suggest entering into those contracts. Further, make sure that you are aware of your insurance situation. If you purchased RA or CRC, you may be nearing the level where the price change alone will trigger payments. If that is the case, I would look to cover any short futures positions in the $3.10-$3.25 region, basis December 2007 CBOT.” Roberts also says farmers should be ready to book 2008 bids, “In 2008, there will need to be plantings of at least 93m acres, and preferably 94m, and CBOT prices of $3.50 will not ensure sufficient acreage. So expect Dec ’08 futures to remain above $3.75 until harvest, and then to start moving above $4 once attention turns to 2008 plantings.”
At Illinois, Darrel Good says buckle your seat belt because corn prices should be volatile, and at higher levels than in past years. But with large supplies following harvest, he says the basis will be wide, and smart marketing will depend upon watching the basis, “For those with on-farm storage, the combination of weak new crop basis and large carry in the futures market suggests that pricing for delivery late in 2007-08 marketing year offers the opportunity for very good storage returns. On July 17 2007, for example, the harvest bid in central Illinois was $.76 under July 2008 futures. If the basis improves to a typical level of $.15 under July by June of 2006, the market is offering a storage return of $.61 per bushel. At 8 percent interest, the cost of holding $3.00 corn for 8 months is only $.16.”
Summary:
If 85 million acres are harvested as USDA estimates, the yield is the only issue unsettled before knowing if we’ll have enough corn to meet the 2008 demand. While private analysts have estimated a wide range of yields, Land Grant Outlook Specialists have focused on the 149 to 152 area for projected yield. Based on demand they believe harvest prices will remain above the $3 range, but with the large supply there will be wide variations in the basis as well as considerable price volatility.
Posted by Stu Ellis at 12:53 AM | Comments (0) | Permalink
July 18, 2007
If You Will Be Paying More Cash Rent Next Year, How Much Can You Really Afford To Risk?
If your landlord or farm manager hasn’t yet approached the subject of more cash rent for next year, it is only a matter of time. Crop share land owners already have a share of higher crop prices, and may or may not want a larger percentage. However, cash rent landowners also want a share, and will likely be able to get it, either from their current operator or from a competing operator. But what is your risk in agreeing to higher rent?
Most cash rent operators probably agreed to a higher rent for the current crop year because of climbing commodity prices last fall. And the jump upward probably won’t hold a candle to the next jump higher. But as rental agreements are negotiated, they always must be fair for both sides. That is hard to do when drooling neighbors are visiting with every landowner in the county. But along with today’s increased prices there are increased risks that could financially undermine your operation. And it is up to every farmer to identify those risks and manage them.
Farm Management Specialist Gary Schnitkey at the University of Illinois has completed a thorough study of how to quantify those market risks, to guide farmers and landowners toward the type of lease that will be fair to both owner and operator and allow both sides to share in the premium prices offered by the market. In his latest newsletter http://www.farmdoc.uiuc.edu/manage/newsletters/fefo07_12/fefo07_12.htmlSchnitkey says today’s high commodity prices will be offset by higher production costs and lower government support payments. As a result, farmers will have to find a way to retain a larger share of the revenue stream to protect against the risks of the marketplace and the higher cash rent agreements that will have to be paid out.
Revenue comparison
Schnitkey used the years of 2001 to 2005 as a base for comparison to the 2008 crop. (In 2006 prices began to change and 2007 prices aren’t fully known.) “Corn crop revenue is projected at $623 per acre in 2008, an increase of $236 over the 2001-2005 level of $387 per acre. Soybean revenue is projected at $442 per acre in 2008, a $142 increase over the 2001-2005 average.”
Expense comparison
Total non-land costs for corn are projected at $314 in 2008, an increase of $57 per acre from 2001-2005 level of $257 per acre. Total non-land costs for soybeans are projected at $199 in 2008, an increase of $28 per acre over the 2001-2005 level of $171 per acre.
Government payment comparison
In 2001-2005, loan deficiency payments (LDPs) averaged $29 per acre for corn and $14 per acre for soybeans. Projected 2008 commodity prices result in no LDPs. In 2001-2005, direct and counter-cyclical payments averaged $35 per acre. Counter-cyclical payments are not projected for 2008 projected prices. As a result government payments decline to $27 per acre.
Returns to operator and land
In 2001-2005, operator and farmland returns averaged $257 per acre for corn and $171 per acre for soybeans. Given a ½ corn – ½ soybeans rotation, operator and farmland return averaged $199 per acre, or $199 per acre to split between the landlord and the farmer. If cash rent averaged $150 per acre, farmers received an average return of $49 per acre. For 2008, operator and farmland returns are projected at $314 per acre for the ½ corn – ½ soybean rotation, an increase of $115 over the 2001-2005 average.
Future risk
Schnitkey says farmers will have three additional risks in coming years that will jeopardize their net revenue.
1) “Price variability likely will be higher over the next several years.” Using the volatility in the options market for fall delivery corn and beans, Schnitkey says the price risk for 2007 crops is twice of what the risk was for crops in the 2001 to 2005 period.
2) “Federal commodity programs will not provide as much downside price protection.” In the 2001 to 2005 period corn prices only had to drop below $2 to provide LDP income. Today, corn prices are $1.50 higher than such a threshold, given a continuation of the 2002 Farm Bill commodity program.
3) “Revenue for crop insurance must fall more in periods of high prices before insurance payments are received.” When commodity prices are high, they have to fall a lot farther before a crop revenue insurance policy make indemnity payments.
If an operator expected to make $50 per acre in the 2001-2005 period, and the same $50 per acre in 2008 after all expenses and rent is paid, Schnitkey calculated only an 11% chance of losing money in the 2001-2005 period, but a 35% chance of losing money in 2008. In other words, bidding up cash rent, and still trying to clear the same money as in the first half of the decade, an operator triples his chance of losing money. If the operator wants to retain the lesser chance of red ink, then the cash rent will have to be lower than what most landowners will want to accept.
Summary:
Higher commodity prices have created a major economic change for agriculture, but along with them come higher production costs and lower government payments. That scenario results in increased risk for operators who will find themselves either paying higher cash rents next year or being asked to do so. Although landowners want a share of the commodity prices, higher rents and the increased volatility in commodity markets create a greater chance for operators to be squeezed into a negative financial position.
Posted by Stu Ellis at 12:31 AM | Comments (1) | Permalink
July 17, 2007
Droughty Pastures Require Serious Management
Western Cornbelt pastures are drying up. Eastern Cornbelt pastures never did get very lush this year. And Cow/calf operators across the upper Midwest are wondering if their forage resources can be stretched any more. If pasture is a problem, the farm gate has some possible solutions.
Beef cattle are thinking to themselves, “This is déjà vu all over again. Last summer my grass dried up, and this summer it is doing the same thing and it isn’t even August yet!” In fact many cow/calf operators are saying the same thing as their cattle, but they are the ones who can do something about it. There are short term and long term actions that can be taken focused on extending resources, pasture improvement, and reduction of pressure.
Extend your current forage resources
Kansas State beef specialist Twig Marston recommends several actions you can take today to extend what little pasture you may have:
• Enhance grazing distribution with a mineral mixture placed away from water sources.
• Observe pasture weed problems to help plan control methods for next spring.
• Monitor grazing conditions and rotate cattle to different pastures, if possible and practical.
• Be prepared to provide emergency feeds if pastures run out in late summer. Providing supplemental feeding now can help extend the grazing period.
• Supplement maturing grasses with a degradable intake protein for stocker cattle and replacement heifers.
• Avoid unnecessary heat stress by handling cattle during the coolest parts of the day.
University of Nebraska forage specialist Bruce Anderson suggests sacrificing a small paddock where cattle can be kept for longer periods, allowing the rest of the pasture to recover. He characterizes it as, “A small area converted into a temporary feedlot. Although the sacrifice area will be unusable for grazing for the remainder of the season, it leaves the rest of the pasture in better condition due to reduced traffic and grazing. Often the best pasture ground makes the best sacrifice paddock. Good pasture ground will be easier to reseed and more likely to succeed the following year.” Anderson says you can also move the feed bunk, parallel to Marston’s suggestion of moving the mineral box. Wasted hay and manure will enhance grass recovery as much as smothering it.
Anderson says the grazing rules change when pastures dry up. Don’t expect pastures to grow without moisture, “Therefore, it usually is in the producer's best interest to graze pastures completely.” If it takes a heavy rain to get any growth response, Anderson says, "At that point it is best to leave only enough grass to protect your soil from eroding. Any grass left behind will not regrow when it is this dry, and probably will be gone or worthless by the time cattle return later." Six weeks is needed for recovery after a rain, or the plant will be unable to recover from the drought stress.
Reduce the size of the herd
There are two ways to reduce the pressure on the pasture.
1) Marston recommends that producers consider weaning calves earlier than normal. Early weaning can be effective, if current range conditions are limiting milk production in cows and if the cows are losing weight or body condition. Before weaning calves early, producers should make sure that they have the facilities and management available to handle lightweight calves. First calf heifers have the most to gain from early weaning, and feeding early-weaned calves is more efficient than feeding cows without weaning their calves.
2)University of Illinois livestock specialist Justin Sextensays you can also reduce the stocking rate with an early departure of cull cows. He says culled stock contributes 16% of your income and astute marketing will not only ease your pasture problem, but improve your revenue. Sexten says a 10 year study by John Lawrence at Iowa State found that cull cow value peaked in June, then declined through November. To take advantage of that marketing opportunity, conduct early pregnancy checks and cull your open cows early in the summer.
Additional pasture may come from your wheat stubble. After wheat harvest, planting annual grasses can provide an alternative to a dry pasture. Sexten says, “Pearl millet, sorghum-sudangrass, sudangrass and certain forage brassicas can be seeded after wheat and grazed 60 days later. These forages are adapted to growing during the hot periods of the summer unlike cool-season grasses which make up most permanent pastures. Prussic acid can be a concern for sorghum-sudangrass and sudangrass pastures. To avoid this potentially deadly problem wait until these forages are 24 inches tall before grazing or cut them for hay. The drying process of haying allows the toxic compound to dissipate. Pearl millet does not contain the compound causing prussic acid poisoning so it may be grazed later into the fall.”
If you use wheat stubble for a seedbed, Nebraska’s Anderson makes several recommendations:
1) When planting alfalfa the best way to minimize (crop residue) is to bale the straw and be sure to have a well-functioning drill.
2) Control weeds that exist prior to planting with herbicides like glyphosate and be ready with post-emerge herbicides like Select or Poast Plus for weeds or volunteer wheat that emerge later.
3) To ensure a good stand consider cross-drilling or double-drilling by planting one-half of the seed while driving in one direction and the other half while driving at an angle to the first direction.
Bolster pasture health for the future
If you pasture is tall fescue, or another cool season forage, it will appreciate a shot of nitrogen as it prepares for fall growth. University of Illinois Crop Systems Specialist Robert Bellm says August is a prime time for fertilization, “Tall fescue will respond to nitrogen fertilization as well as or better than any other forage grass. In fact, forage production can be increased between 1000 and 2000 lbs per acre for each 50 pounds of nitrogen applied. In addition to a nearly linear increase in forage production from nitrogen applications, forage crude protein also increases while neutral detergent fiber decreases. How much nitrogen to apply depends upon several factors, such as the thickness and uniformity of the grass stand, and whether or not legumes are present in the sward. If at least 30 percent of the forage mix consists of legumes such as clover, additional nitrogen fertilizer may not be needed. On the other hand, if the forage mix is predominantly grass, then 50 – 100 pounds of nitrogen per acre should be applied.”
Summary:
Drought conditions can be as devastating to livestock producers as grain farmers, but pasture management can be easier by reducing stocking pressure with early weaning and early culling of open cows. The supply of forage grasses can also be extended with strategic pasture management, including fertilization prior to fall growth. As an alternative to a dry pasture, annual grasses can be planted into wheat stubble.
Posted by Stu Ellis at 12:15 AM | Comments (0) | Permalink
July 16, 2007
Should Disaster Assistance Be Part Of The Farm Bill: Are You Pro Or Con?
As years go by, as the farm population declines, and as the federal budget becomes more of a political issue, the Farm Bill becomes more controversial. One of the lightning rod issues this year is proposed permanent funding to provide disaster assistance. While farmers have always fought adverse weather, which was one of the founding reasons for initial farm legislation, disaster aid is a more relatively recent addition. Since disaster aid is issued nearly every year there are strong supporters. Since disaster aid is issued nearly every year there are strong opponents who say the system needs fixed.
Chairman Collin Peterson of the U.S. House Agriculture Committee has included in his version of the Farm Bill provisions for permanent disaster funding, to prevent the need for perennial emergency legislation. Agriculture Policy Specialist Carl Zulauf at Ohio State University says “To qualify for emergency assistance, a producer (A) must have purchased insurance if it exists for the crop at a minimum of 50% yield coverage at 100% of the insurable price or must have paid the fee for a crop covered under the Non-insured Crop Assistance Program, and (B) farm in a county declared a disaster county or in a county contiguous to such county.” While this is a “pay to play” disaster program there is also a $100,000 limit on benefits.
In addition to a tree damage and livestock death loss elements, the heart of the program is a whole farm crop protection program that has many parallels to the crop insurance program. Zulauf’s analysis includes:
• Payment equals 50% of the difference between the farm’s disaster assistance guarantee and total revenue.
• The Disaster Assistance Guarantee for each insurable crop that is calculated on county yield, countercyclical payments, and crop insurance yield guarantee.
• A Disaster Assistance Guarantee for each non-insurable crop is also available.
• A Disaster Assistance Guarantee for a crop can not exceed 90% of the farm’s expected revenue from the crop, which is calculated with grazing value, production history, counter cyclical payment, the insurance price guarantee, and acreage that is planted or intended to be planed.
• Total Farm Revenue for each crop and for the total farm is estimated using acreage harvested or grazed, average market price for the first 5 months of the marketing year, crop insurance indemnity payment, and any other federal disaster payment.
Opponents call for renovation of the crop insurance program to achieve what is needed by producers. Supporters call for assistance to farmers needing to cover the gaps in crop insurance. Zulauf says there are many questions that need to be answered about the proposal from Chairman Peterson.
1) He calls the proposal a shallow los disaster program, since crop insurance indemnities are included in total revenue, but the disaster program covers losses associated with the deductible.
2) No premium is paid for the disaster aid program, but the expected payments provide an incentive to use the already-subsidized crop insurance program.
3) Since crop insurance is already subsidized, should that be deducted from the disaster assistance program payment.
4) Total farm revenue does not include loan deficiency payments or counter cyclical payments, so Zulauf says farmers are being paid twice for the risk of low prices.
5) Zulauf says a moral hazard exists, since there is a floor under the yield guarantee, and with a low yield and no future loss in payments, there may be an incentive to cheat on yield.
6) By farming in multiple counties, maybe only one of which is declared a disaster, that qualification for assistance encourages geographical diversification and larger farms.
That is Carl Zulauf's analysis of the disaster assistance proposal. Your thoughts are welcomed about whether there should be disaster assistance as a permanent element in the Farm Bill or not. Have prior disaster plans helped your operation? Could they be exchanged for improved crop insurance coverage? Use the comment space provided below.
Summary:
The politically charged issue of disaster assistance will soon be debated within the House Agriculture Committee, and possibly the House floor, as part of the 2007 Farm Bill. Despite the lack of consensus on inclusion of disaster aid, the proposal up for debate would require farmers to purchase crop insurance before they could collect disaster aid on areas that crop insurance does not cover. The proposal depends on calculations that are complex, leave out some calculations, and may leave open to door to dishonesty in reporting yields.
Posted by Stu Ellis at 12:23 AM | Comments (2) | Permalink
July 13, 2007
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
USDA’s Supply Demand Report yesterday raised 2007/08 corn supply to 14 bil. bu. as 2.5-mil. more acres raised production by 380 mil. bu. Old crop carryout rose by 150 mil. bu. to 1.1 bil. Feed and residual dropped 100 mil. bu. reflecting disappearance in the June 29 Stocks Report. Exports dropped 50 mil. bu. due to slower export shipments even as export sales and outstanding balances indicated strong demand for old-crop supplies. The season average price dropped 30¢ to a marketing year range of $2.80 to $3.40.
The USDA report projected soybean production at 2.625 bil. bu., down 120 mil. bu., since harvested area dropped 2.8 mil. acres in the June 29 Acreage Report. Lower production and reduced carry-in leaves new crop ending stocks at 245 mil. bu. The season-average price for 2007/08 is projected at $7.25 to $8.25 per bu., up 60¢.
USDA estimated wheat production at 2.138 bil. bu., down 29 mil. from the June estimate, but boosted by an additional 10 mil. bu. carry-in. Winter wheat production is lowered 48 mil. bu. as heavy June rains reduced yields in KS and OK. Lower hard red winter wheat production is partly offset by higher soft red winter wheat production. Exports for 2007/08 are raised 50 mil. bu. as competing exporters have less to sell. The season-average price range is raised 30¢ on each end to $4.80 to $5.40 per bu.
Western Cornbelt crops may get thirstier says IA State’s Elwynn Taylor, who says low pressure is settling into the Gulf of Alaska. “When this persists rain is short north of a line from Kansas City to Chicago. This may become a serious factor this year. With that risk to the western Cornbelt and a return of the Bermuda High to a too far west position, risk of below trend Cornbelt yield is increasing, but is not yet the likely outcome.”
IA State meteorologist Elwynn Taylor estimates a 50/50 chance for a 152 bu. national yield as of July 2. The chance of a yield above 163 bu. is 27%, the chance of drought yield below 133 bu. is 23%, and the chance of exceeding the 148.4 bu. trend is 54%. He bases that on: initial subsoil moisture, a statistical risk of widespread drought, the shift from El Nino to neutral, and sea surface temperatures in the Pacific and the Gulf of Mexico. He says corn conditions are similar to that of years that exceeded yield trends.
Continuing drought in the eastern Cornbelt is threatening yields. Ohio St. agronomists say most of the corn is at the point of pollination, with insufficient moisture supply:
1) 4 days of stress at the 12-14th leaf stage has the potential of reducing yields by 5-10%.
2) 4 days of moisture stress at tassel emergence has the potential to reduce yields10-25%.
3) 4 days of moisture stress at pollen shed has the potential to reduce yields 40-50%.
4) 4 days of drought at the blister stage has the potential of reducing yields 30-40%.
5) 4 days of drought at the dough stage has the potential of reducing yields 20-30%.
Check your pollination progress. Carefully remove the husks from the ear, making sure you do not disturb the silks. After removing all the husks, grasp the butt end of the ear and give it 2-3 vigorous shakes. Silks leading to fertilized kernels will break easily at the kernel. Consequently, ears with only a few remaining silks attached have been properly pollinated. But ears with numerous silks still attached have yet to receive pollen.
Wait about 2 weeks after the end of pollen shed before making any yield estimates. If the kernels were fertilized, the small white blisters on the ear will be rapidly increasing in size. To tell if fertilization has occurred, slice the kernels longitudinally through the embryo side and look for the embryo. Only fertilized kernels will produce embryos.
Crop dusters have been thicker than Japanese beetles over cornfields, where farmers fear loss of $3.50 corn from foliar diseases. At $2 corn, fungicides rarely pay off, but current economics need to be analyzed, by comparing spray cost to expected yield benefit at tasseling of the corn plant. Get the analysis.
On the issue of foliar fungicides, IA State specialists urge farmers to make a checklist:
1) Take note of the resistance to foliar disease of the hybrid being grown.
2) Scouting will give a very good indication of the disease pressure in that field.
3) Look for disease development on the lower leaves up to and including the ear leaf.
4) Wet, warm conditions favor infection and spore production of northern leaf blight.
5) Corn planted after mid-May will be at a greater risk for yield loss from foliar disease.
6) Second year corn is more threatened by foliar disease pathogens that survive winters.
7) Most fungicides are effective against disease for 14 to 21 days.
Outsmarting corn rootworms is the next strategy being studied by entomologists. The plan calls for planting a strip of corn through or around soybean fields, attracting the adults to lay eggs in a death trap and reduce the potential problems the next year. The long-term goal of this research is to assess the potential value of trap crops in concert with Bt or soil insecticides to manage western corn rootworms more effectively.
Western bean cutworm moths currently are laying eggs in cornfields and lay most of their eggs during peak moth flight, which usually occurs in mid-July. In 2006, peak moth flight generally occurred during the week of July 17-24. Based upon the occurrences of other insects in IL this year, you should expect peak moth flight earlier than last year.
1) IA State Univ. site
2) Degree-day calculator for insect pests
3) Identification Videos
Japanese beetles have appeared in Biblical proportion in some areas, but instead of corn this year they are preferring soybeans. IL bugmeisters say, “The accumulated effect of previous and continuing defoliation could eventually exceed the published economic threshold of 20% defoliation during reproductive growth. With the price of soybeans what they currently are, this relatively conservative threshold probably is appropriate.”
Soybean aphids have caused more yawns than concerns this year, but populations are increasing in northeastern IA and southern MN, with entomologists urging farmers to be on the lookout if weather remains cool. The doubling time for soybean aphid populations is 2-3 days when temperatures are in the upper 70s and lower 80s, as forecast next week.
23 fungicides are now labeled for soybean rust. Headline and Quadris provided good control in 7 of 8 test plots in 2005, but USDA researchers said 2006 economic benefit with the use of Quadris or Headline fungicide was realized only 40% (10/25) and 25% (8/32) of the time, respectively. Find the list.
Glyphosate resistant weeds may become more widespread, but compared to the need for conventional herbicides, the use of glyphosate is friendlier to the environment say IL researchers who looked at the degree of potency needed in the alternative herbicides. The researchers believe that dosage to achieve a 50% weed kill would increase more than 100 times in soybeans, and 500 times in cotton. With no-till, the use of glyphosate resistant seeds reduces the use of a herbicide with a 50% kill rate only in corn.
The post mortem on 2007 wheat is dominated by the April freeze. IL Crop Specialist Emerson Nafziger says, “Except for the freeze, the spring weather was nearly ideal for wheat, with dry weather in most areas and warm temperature that hastened development. Without the freeze, we would very likely have had a new record yield.” Nafziger said agronomists underestimated the ability of the crop to produce heads on secondary tillers.
Near breakeven is the outlook for farrow-to-finish returns over the next 12 months. Purdue economist Chris Hurt says all costs should be covered, including family labor and full depreciation. Even though the hog price outlook has weakened somewhat with USDA’s latest inventory report, lower corn price prospects have compensated. Over the next 12 months, Hurt is forecasting a slight profit of about $.50 per hundredweight.
Hurt’s pork profit prediction depends on feed costs. “Corn and soybean meal prices could still be dynamic over the next few weeks until the size of this summer’s crops become clearer. Each $1 change in corn prices impacts national hog production costs by roughly $5/cwt.” Read his newsletter.
Livestock contributes a $3.1 bil. impact in IL, according to an in-depth Univ. of IL study. There are 40,070 livestock farms in IL, 26% commercial and 74% non- commercial. There is $1.939 billion direct output of livestock products, 29,400 full time equivalents of total employment, and $256.78 million of total tax contributions.
The IL livestock sector had been in a 30 year decline which stabilized and showed some growth trends from 1999-2004 says economist Pete Goldsmith, “The dairy and beef herds are the 25th largest and it will be interesting to see if the availability of DDGS from the ethanol industry will bring those species back to IL. Opportunities may exist for livestock operations to co-locate with ethanol plants, to take advantage of low-cost feed supplies.”
Posted by Stu Ellis at 1:10 AM | Comments (0) | Permalink
July 12, 2007
Three Out Of Four Acres Of US Corn And Soybeans Are Genetically Enhanced. What Is Your Rate Of Use?
Are you behind the curve or ahead of the curve when it comes to planting biotech crops? Or are you one of those farmers who wants the benefits of the technology, but are in a marketing area that limits what you can plant because of export market restrictions? When the ag statisticians were preparing for USDA’s planted acreage report, they also randomly asked if the corn or soybean crop in the surveyed field was planted with a biotech seed. You may or may not be surprised at the results.
Unless you are growing non-genetically modified beans for a specialty market and a premium price, there is a good chance you are raising soybeans with a herbicide tolerance. Most of those will be Roundup Ready or glyphosate tolerant beans, but the USDA refers to them as GE or genetically enhanced soybeans. Such GE beans are produced on 91% of the soybean acreage in the US, according to the 2007 NASS survey. That has grown from 54% in 2000 when the first such data was collected, but as expected the rate of increase has slowed in recent years.
Some Cornbelt states have planted more than 90% of their soybean acreage with GE beans. They include IN and IA at 94%, NE at 96% and SD at 97%. And ND at 92% has come a long way from the 22% level in 2000. IL, OH, MI, and WI are still in the upper 80% range. Outside of the Cornbelt, MS is at 96%, AR is at 92%, and other soybean producing states that are grouped together are at 86%. Curiously, AR has leveled off at 92% for the past 4 years, and MS has been at 96% for the past three.
Herbicide tolerant soybeans are the primary variety of GE soybeans, but USDA does draw a distinction between herbicide tolerant and all GE soybeans. Even though the survey is separated, for all practical purposes the statistics in each survey are identical. The corn survey results are more expanded, since the NASS statisticians reported they had to ask more questions about corn hybrids. “Randomly selected farmers across the United States were asked if they planted corn that, through biotechnology, is resistant to herbicides, insects, or both. Conventionally bred herbicide-tolerant varieties were excluded. Stacked gene varieties include those containing GE traits for both herbicide tolerance (HT) and insect resistance (Bt).”
The aggregated corn report on all GE hybrids indicates 73% of the US corn acreage has been planted with some type of biotech corn. With that hint of increased yield potential from the biotech hybrids, USDA’s Supply Demand report for July, being released later this morning (July 12) may reflect the results of the biotech seed report.
As in soybeans, SD is leading the pack by planting biotech corn with 93% of its acreage. It is followed by ND at 88%, MN at 85%, and KS at 82% biotech corn acreage. IL and IA are in the 70% range, IN is at 59% and OH at 41%.
For biotech corn that has only insect resistance, the national average is 21% but MO, NE, KS, MN and ND are the only states well above that level. IA is at 22%, IL, WI, and MI at 19%, and a collection of smaller corn producing states are at 20%.
For biotech corn with only herbicide resistance, the overall national average of 24% is a bit higher. ND and TX lead with 37% use, followed by KS, MN, SD, and the lesser corn producing states all in excess of 30% of their acreage in herbicide tolerant corn. The larger producing states of IL, IA, and IN are only in the 15 to 19% range, along with WI at 19%. OH, which has insect resistant corn on only 9% of its acres, only devotes 12% of its acres to herbicide resistant corn.
The widespread availability of stacked gene hybrids has only been in the past two years, but the popularity of such biotech corn is evident with its rapid claim on acreage. Nationally, it is at 28%, with SD at 43% acreage, then IL and IA at 40% and 37% acreage respectively. As an indication of the popularity of stacked gene hybrids, 7 of the 13 surveyed states recorded a doubling of acreage from 2006 to 2007.
Summary:
Biotech crops have become common across the Cornbelt, both herbicide resistant soybeans and corn with a variety of insect and herbicide resistance. The rate of adoption of herbicide resistant soybeans is slowing as the market matures. However, the rate of adoption of genetically enhanced corn is accelerating. Nevertheless, three out of four acres of corn and soybeans in the US are genetically enhanced. While that trait may have been sold to farmers as one that either saves the cost of labor or cost of spray, a primary benefit may be increased protection for the crop that allows it to produce a better yield.
Posted by Stu Ellis at 12:06 AM | Comments (0) | Permalink
July 11, 2007
Prospects for Profits in Pork Production In The Next Year
USDA’s recent Quarterly Hogs and Pigs Report held little surprise that the US pork industry was expanding, but ironically it was released on the same day USDA forecast a nearly 13 billion bushel corn crop. Combined, the synergy was more pork at lower prices for the consumer, but with more corn on hand, production costs for the producer would be friendly to profit potential.
On the surface it would appear that plenty of corn will be available for hogs, which have little use for distillers’ grains. But the murky market underneath that surface has done little to reveal the new era price trends for corn and soybean meal.
From his vantage point at Purdue, livestock economist Chris Hurt observes that the April to June quarter was the tenth consecutive quarter for expansion of the breeding herd. It has been slowly progressing, helped by larger litters, more sows, higher weaning rates, and more intended farrowings. Those factors will contribute to a 3.2% rise in pork production over the next year, compared to the past year, says Hurt.
Some of that extra pork will be exported, since the export market has kept the pork afloat in the past year. Livestock economists Glenn Grimes and Ron Plain at the University of Missouri say, “Pork exports in April were down 12.4% from a year earlier. For January-April pork exports were down 1.0% from this period a year ago. Pork exports for January-April were up 12.5% to Japan, up 1% to Canada, down 24.3% to Mexico, down 17.4% to Russia, up 7.9% to South Korea, up 31.9% to mainland China and Hong Kong, down 47% to Taiwan, down 33.9% to the Caribbean, and up 6.6% to "other." The big decline for the first 4 months of 2007 was in exports to Mexico which were down over 52 million pounds from 12 months earlier.”
Purdue’s Hurt calculates market values under the $50 threshold for most of the coming 12 month period, “Prices of live hogs are expected to average about $48.50 per live hundredweight over the next 12 months based on 51 percent to 52 percent lean carcasses. Prices for the third quarter are expected to average in the $50 to $54 range. Last quarter prices are expected to drop to $43 to $47. Winter prices may improve some to $45 to $49, with second quarter 2008 prices back up to $48 to $50.”
With those prices, will there be any profit opportunity? Hurt believes prices will be floating about the average breakeven point, and while some producers will be in the black others will be in the red. The saving factor is the expectation for softer corn prices. But Hurt says, “Corn and soybean meal prices could still be dynamic over the next few weeks until the size of this summer's crops become clearer. Each $1 change in corn prices impact national hog production costs roughly $5 per live hundredweight. The estimated corn breakeven prices over the next year given current futures price estimates for soybean meal are $4.18 per bushel this summer, followed by $2.85 in the fourth quarter, and $3.06 and $3.77 for the first two quarters of 2008, respectively.”
Market weights are still hefty, in the wake of expensive feed, but Mike Brumm’s comments at the University of Nebraska’s Pork Central Mike Brumm says producers have adjusted to high feed prices. Hogs in the Upper Midwest are being slaughtered at weights parallel to the past several years when corn prices were lower. “Even with late finishing diet ingredient costs approaching $160/ton, today’s genetics are capable of putting on 1 pound of gain using less than 4 pounds of feed as they grow from 270 to 290 pounds. With feed costing $0.08/lb, feed cost per pound of gain for these last pounds of gain is only $0.32.”
As the pork industry prepares for a breakeven year, Grimes and Plain say there is still a definite cycle. “From late 1999 to late 2000 there were 13 months of growth in demand for live hogs. From late 2000 to late 2001 there was mixed demand action but losses most of the time for 12 months, then there were 17 months of losses. From mid-2003 to mid-2005 there were 26 months of growth. This growth period appeared to be associated with the popularity of high protein diets. Following the 26 months of growth, there were 14 months of losses in live hog demand. For the last 11 months, there has been growth in live hog demand. A part of these fluctuations in demand for live hogs was probably tied to pork exports.”
Summary:
Thanks to the export market and softer prices for corn, the growth in US hog production will bring abundant supplies and friendly prices to the consumer, without pushing too many produces into the red. Breakeven prices may be the best that most producers can muster, which demands a good risk management plan for buying corn and selling hogs in the coming year. With hogs putting on low cost weight, both the producer and consumer should benefit from the current dynamics.
Posted by Stu Ellis at 12:29 AM | Comments (0) | Permalink
July 10, 2007
Equity Among Support Prices? You Must Be Kidding!
As the summer heats up in Washington, so does the debate on the 2007 Farm Bill, and Chairman Collin Peterson of the House Agriculture Committee has distributed his proposal for full committee consideration in the next week. After his subcommittee on commodity programs opted for an extension of the 2002 legislation, Peterson has built that into the “Chairman’s Mark.” But what price supports are being proposed?
The Chairman’ Mark proposal extends the safety net programs authorized in the 2002 Farm Bill with minor changes, 1) Increases target prices for wheat, barley, oats, oilseeds and soybeans, which increases producers’ opportunity to receive counter-cyclical payments when prices are low, 2) Continues support for farmers through direct payments, and among other things, 3) “Rebalances loan rates on wheat, barley, oats, oilseed, small chickpeas and graded wool.” What does “rebalance” mean, and does that imply inequity among commodity loan rates, target prices, and other farm program payments?
There is inequity, based on the findings of the Congressional Research Service (CRS), which completed an assessment of the commodity payments after the subcommittees finished their work and before the Ag Committee Chairman posted his proposal. So the report is ripe for inclusion in the new Farm Bill.
There are 18 “covered commodities” in the Farm Bill which have payment programs, and CRS says there is little relationship among them. Their evolution has been a tug of war between farmers who have argued for cost of production and economists who have argued for them to be based on market prices. CRS says with little relationship between commodities, the payment rates have little relationship with each other. “During the past ten years (1997-2006), monthly average market prices for the major “covered commodities” have been below loan rates 36% of the time, and below effective target prices 59% of the time. However, this frequency has varied substantially across crops. This report calculates adjustments to policy parameters that would put each of the commodities “in the money” an arbitrary 30% of the time with regard to marketing loans and an arbitrary 50% of the time with regard to adjusted target prices.” In brief, “Barley, oats, and peanuts have disproportionately lower adjusted target prices and marketing loan rates. The situation is mixed for corn and wheat. Soybean target prices and loan rates are closest to neutral according to the thresholds used in this comparison.”
Although the report covers many more commodities, only the following will be addressed in this abbreviated report. Wheat has a 52¢ direct payment, a $3.92 target price, and a $2.75 loan rate. Corn has a 28¢ direct payment, a $2.63 target price, and a $1.95 loan rate. Soybeans have a 44¢ direct payment, a $5.80 target price, and a $5.00 loan rate.
Over the past 3 years, CRS calculated the payments as a share of the market value of the commodities. That came out to be 21% for corn, 15% for wheat, and 4% for beans. (Rice and cotton were between 50% and 60 %.) When the CRS economists examined the relationship between cost of production and target price, the corn target price was at 98% of the cost of production, beans were at 91% and wheat was at 64%. (Peanuts were at 101% and sorghum was at 47%.) The CRS researchers express their preference for a safety net of support prices just below the long term trend of market price levels. That may be close to USDA’s Farm Bill proposal which has loan rates at 85% of a five year Olympic average. When comparing loan rates, CRS says, “Based on 120 monthly data points for the 1997 through 2006 period, market prices dropped below their corresponding loan rates 36% of the time for nine program commodities. However, wide variation appeared across commodities. For example, upland cotton prices were below the cotton loan rate 77% of the time. In contrast, the barley market price was below the barley loan rate 3% of the time.”
The 2002 Farm Bill brought the concept of counter-cyclical payments to the Cornbelt, which were designed to soften the financial blow when average market prices were below target price levels, but above loan rates. In the past 10 years, corn prices would have been eligible for CCP’s 76% of the time and under the loan rate 28%. Wheat has been under the target price 60% of the time and under the loan rate 23%. Beans have been CCP eligible 40% of the time and eligible for the loan rate 33% of the time. (Cotton is eligible for CCP payments 95% of the time.)
To equalize the loan rates for the covered commodities, corn would have a 1% increase, wheat a 4% increase and soybeans a 2% decrease. (Barley would see a 17% increase in the loan rate, and rice a 41% decrease.) To equalize the target price, corn would see an 11% drop, wheat a 2% drop, and beans a 3% rise in the target price. (Barley would increase 17% and cotton would drop 31%.)
Summary:
With the advent of a new Farm Bill, lawmakers are considering levels of price supports for commodities, which is a push and pull exercise that includes farm organizations and budget cutters. If those levels are to be changed, what logic is used in the process may or may not be based on economic trends or even market prices. However, the numbers will likely be set in the next couple of weeks, and they may or may not be demonstrate any equity in their relationships. They have not in the past, and there is no indicate that 2007 will be the year it will start doing that.
Posted by Stu Ellis at 12:43 AM | Comments (0) | Permalink
July 9, 2007
Review This Report Card On The Use Of DDGS, Corn Gluten, And Other Ethanol Co-Products
There is a new sheriff in town, and he’s changed the culture of the community. The new sheriff and his posse are the variety of co-products from the refining process that converts corn to ethanol. They have replaced the use of corn and soybean meal in many livestock rations, caused livestock operators to reformulate their rations to take advantage of cost savings and the difference in nutritional values. Because of the Cornbelt culture shock created by the ethanol co-products, USDA’s statisticians needed to find out the impact of the changes.
The National Agricultural Statistics Service surveyed 9,400 Cornbelt livestock operations this spring to determine how many were using one or more of the co-products, what was being fed, and their characteristics, along with the barriers of using them, and preferences of the operators. Included in the survey were dairy operations, feedlots, cow/calf operators and pork producers. Out of the 94 hundred surveyed, 1,276 had used ethanol co-products in their feed ration during 2006, as reported in Ethanol Co-Products Used for Livestock Feed.
The products in the survey included: brewers dried grains, complete feed, condensed distillers solubles, corn distillers dried grains (DDG), corn distillers dried grains with solubles (DDGS), corn distillers dried solubles, corn gluten feed, corn gluten meal, distillers wet grains, dry milled, and wet milled.
Dairy Operations
38% of the operations surveyed were using co-products, and had been for an average of 9.2 years. 22% were not using them, but would, and 40% would not consider it. 77% were buying them from feed companies or co-ops with the balance split between purchases at the ethanol plant or through feed brokers. 56% were buying the co-products on a spot contract, with 32% pricing it against corn and 44% pricing it against both corn and soybean meal. The dairy operators were generally happy with their suppliers, which provided a variety of nutritional and consulting services. 59% of the operations had the feed company help with the feed formula, and 24% used an independent nutritionist. The dairymen were primarily (45%) using distillers’ dried grains without solubles. 44% of the operations were evenly split between distillers’ dried grains with solubles and corn gluten feed. Rates of inclusion were 17% for DDG, 8% for DDGS, and 15% for gluten feed. 92% of the operations were feeding an additional protein source and 72% of those chose soybean meal. Of the operations which were not feeding an ethanol co-product, a wide variety of reasons were offered, with the most common at 26% being lack of availability.
Feedlots
36% of the operations surveyed were using co-products, and had been for an average of 5.1 years. 34% were not using them, but would, and 30% would not consider it. 52% were buying them from the ethanol plant with the balance split between purchases at the feed co-op (33%) or through feed brokers (15%.) 55% were buying the co-products on a spot contract, with 66% pricing it against corn and 25% pricing it against both corn and soybean meal. 65% of the feedlot operators were generally happy with their suppliers, which provided a variety of nutritional and consulting services. 54% of the operations had the feed company help with the feed formula, and 31% developed the ration by themselves. The feedlots were primarily (38%) using corn gluten feed. 19% of the operations were using DDG and 14% were using DDGS. Rates of inclusion were 26% for corn gluten feed, 11% for DDG, and 23% for DDGS. 44% of the operations were feeding an additional protein source and 18% of those chose soybean meal. Of the operations which were not feeding an ethanol co-product, a wide variety of reasons were offered, with the most common at 35% being lack of availability, and 22% cited infrastructure and handling problems.
Cow/calf operations
Only 13% of the operations surveyed were using co-products, and had been for an average of 4.6 years. 30% were not using them, but would, and 57% would not consider it. 66% were buying them from feed companies with the balance split between purchases at the ethanol plant (20%) or through feed brokers (14%.) 69% were buying the co-products on a spot contract, with 61% pricing it against corn and 25% pricing it against both corn and soybean meal. 60% of the cow/calf operators were generally happy with their suppliers, which provided a variety of nutritional and consulting services. 40% of the operations had the feed company help with the feed formula, and 49% developed the ration by themselves. The cow/calf were primarily (46%) using corn gluten feed. 25% of the operations were using DDG and 13% were using DDGS. Rates of inclusion were 28% for corn gluten feed, 22% for DDG, and 28% for DDGS. 42% of the operations were feeding an additional protein source and 25% of those chose soybean meal. Of the operations which were not feeding an ethanol co-product, a wide variety of reasons were offered, with the most common at 38% being lack of availability.
Pork operations
Only 12% of the operations surveyed were using co-products, and had been for an average of 2.7 years. 35% were not using them, but would, and 53% would not consider it. 74% were buying them from feed companies and 21% at the ethanol plant. 55% were buying the co-products on a spot contract, with 40% pricing it against corn and 43% pricing it against both corn and soybean meal. 63% of the pork operators were generally happy with their suppliers, which provided a variety of nutritional and consulting services. 73% of the operations had the feed company help with the feed formula, 11% used an independent nutritionist and 13% developed the ration by themselves. The pork operations were primarily (4%) using DDG and 37% were using DDGS. Rates of inclusion were 11% for DDG, and 10% for DDGS. 93% of the operations were feeding an additional protein source and 84% of those chose soybean meal. Of the operations which were not feeding an ethanol co-product, a wide variety of reasons were offered, with the most common at 36% being lack of availability, 16% were concerned about nutritional value, and 14% cited handling concerns.
Summary:
Before soybeans and bean meal came along, livestock were raised on corn and other starch grains. But high protein soybean meal changed feed rations, and now the availability of ethanol co-products is resulting in more change for livestock feeds. Producers of all species have tried them and are using them to some degree, and with some degree of success, once ration formulations are refined. Livestock operators are finding that suppliers are willing to help work out problems and supply many services and ways to purchase the new type of feedstock. The various co-products from the ethanol refining process contain a wide range of protein and fiber contents, which have to be managed, but can usually be obtained at a reasonable price. Those producers who say lack of availability is the reason for not feeding ethanol co-products need only wait a while longer.
Posted by Stu Ellis at 12:10 AM | Comments (1) | Permalink
July 6, 2007
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
If the US yield this year is near 150 bu., the 2007 harvested could total 12.8 bil. says Extension’s Darrel Good. “A yield of only 152.2 bu. would be required to produce a crop of 13 bil. bu. If the remainder of the 2007 growing season is favorable, the crop will be large enough to result in some build-up in inventories during the year ahead.”
Quarterly corn stocks were 3.534 bil. bu. says Good, because use is slowing and supplies are abundant. “Lower than expected corn prices, however, may lead to more consumption than previously forecast. It is significant that the corn market has moved from worrying about declining crop conditions to anticipating a surplus in a period of just two weeks.” Read more.
While US soybean inventories will be reduced dramatically during the year ahead, Good says rationing will not be required with trend or higher yields. “The most important segment of the growing season is just beginning so crop concerns will likely occur, with the focus now turning to a drier western Cornbelt. The market may offer producers very favorable pricing opportunities for old and new beans during the next several weeks.”
US soybean carryover stocks now appear likely to drop to around 200 mil. bu. by August 31, 2008 ,provided August weather permits near-normal yields, says Iowa State Outlook Specialist Bob Wisner. A one-bushel below normal US soybean yield would be likely to drop 2008 US carryover stocks to a very tight 2.4 weeks supply. In 2003-04 when low yields reduced stocks to about that level, soybean futures reached $9-10.
The market is buying bean acres for next year says Wisner. “With a 43 bu./A. average yield in 2008, approximately 7.4 mil. more soybean acres would be needed to maintain 2007-08 total utilization for another year. That is without allowing for any growth in crush or export demand in 2008-09. In other words, the normal increase in world demand for soybeans would need to be met by increased South American production.”
Wisner, at Iowa State, adds, “This year’s sharp increase in corn acreage, barring weather problems, should provide fully adequate corn supplies for feed, exports, ethanol, and other corn processing through August 2008. This picture suggests that corn futures prices have additional downward potential from late July or early August into September. However, the corn market will be sensitive to weather as well as wheat and bean prices.”
This fall the grain industry will be challenged with receiving, handling, and drying 19-24% more corn than last year, says Wisner. Storage space will be in tight supply, but tighter still in the next 2-4 years. The larger supplies create a potential for significant weakness in the harvest-time corn basis. After harvest, the grain trade and fund traders are likely to shift focus to prospects for tightening corn and soybean supplies in 2008-09.
Livestock producers should take advantage of the weakness in the corn market says Jim Mintert at Kansas State. He says since June 25th nearby futures have fallen 25% and new crop is down 22% However 2008 futures have only dropped 11%, which he says was due to the need to ensure there are enough corn acres planted next spring.
Wheat and corn prices have parted ways says Mike Woolverton at Kansas State. “Wheat seems to have stabilized for now at $6 per bu. Wheat price may slip a little as the Northern Great Plains and spring wheat harvests progress. However, any future harvest problems or with spring wheat production could send wheat price higher.”
The weather continues to challenge the wheat crop says Kansas State Extension’s Woolverton. “Unrelenting rain in TX, OK, and KS, and the Easter freeze and insect and disease damage, is resulting in harvest delays and low yields of low quality wheat and heavy dockage at elevators. Insurance adjusters are working over-time to allow producers to plant a second crop. In some areas, that will not be possible because of soggy fields. Many producers are worried about retaining seed wheat of such poor quality.”
If you are planting your own wheat seed, Missouri’s Laura Sweets urges caution:
1) Clean the grain, removing damaged seeds, raising the TKW above 30 grams.
2) Test the germination of 100 seeds to ensure at least 80% of them will grow.
3) Use the germ test to determine if the seedlings will need fungicide protection.
4) Seed from a field with loose smut will produce a greater amount of loose smut.
5) Use the germ test to determine the seedling susceptibility to fusarium head blight.
Yellow soybean mysteries may be attributed to SCN. IL Nematologist Terry Niblack says SCN populations are found both inside and outside the yellow soybean areas, but where soybeans were under drought stress, they were more susceptible to the SCN. Niblack says,” The plants will not recover in terms of yield, even if the symptoms abate.” Read more about the problem.
Yellow soybean mysteries may be attributed to stressful growth conditions preceding the last few weeks in which most soils were fairly dry and plants were not growing very fast. The developing root system is not yet able to meet the increasing nutrient demands, causing a likely temporary nutrient deficiency says Extension’s Fabian Fernandez.
Yellow soybean mysteries may be attributed to a reduction of nodulation and/or number of active nitrogen-fixing nodules which could have occurred. Because in most cropping systems soybeans depend on this symbiotic relationship to supply much of the needed nitrogen, it is likely that soybean plants are experiencing some reduction in the amount of available nitrogen. Read more.
Just because you planted a Bt rootworm hybrid or used a soil insecticide you may not have avoided rootworm injury. You may be surprised, say entomologists Mike Gray and Kevin Steffey. “Even though some Bt corn plants revealed no aboveground signs of stress, the roots revealed considerable pruning.” They are questioning traditional root ratings as a means of identifying whether rootworm insecticides and Bt treatments worked very well.
If your waterhemp is healthy despite glyphosate, you’ll have much more waterhemp next year unless you rescue your Roundup Ready soybeans. Extension Weed Specialist Aaron Hager has several ideas.
1) Treat again with glyphosate at the maximum rate with 17#/100 gal. of AMS.
2) They may be resistant, but try diphenyl ethers: Cobra (Phoenix), Flexstar and Blazer.
3) Tank mix glyphosate with a diphenyl ether, if one doesn’t work, the other might.
If rootworm and Japanese beetles are infesting your corn, make a careful decision on whether to spray say Purdue specialists. Your scouting may help save some money. Read more.
1) Pollen is the rootworm beetles’ favorite food
2) Japanese beetles prefer